Effective early management of respiratory distress syndrome (RDS) has resulted in the survival of an increasing number of very low birth weight infants. However, chronic lung disease (CLD) remains a problem among low birth weight survivors. Infants with chronic lung disease are at greater risk of pulmonary compromise in childhood, rehospitalization, neurodevelopmental delay, and late mortality. The pathogenesis for chronic lung disease involves a cycle of lung injury, repair and fibrosis. Lung injury occurs in susceptible infants exposed to mechanical ventilation and supplemental oxygen. The most promising intervention that has recently been tested is the use of dexamethasone in either preventing or treating chronic lung disease. Glucocorticoid therapy may decrease lung injury through stabilization of cell lysosomal membranes, decreasing inflammatory response, and decreasing pulmonary edema. Although most institutions currently will treat chronic lung disease after 14 days of age, the most promising results have occurred in the small number of studies which have evaluated the institution of postnatal dexamethasone on the first day of life. The specific aim of this study is to determine the effect of early dexamethasone therapy in reducing chronic lung disease and death at 36 weeks postmenstrual age. Secondarily, the study will evaluate the effect of early postnatal dexamethasone on infant's clinical status, number of days on assisted ventilation, number of days on supplemental oxygen, subsequent need for late postnatal steroids, complications related to steroid therapy, and other complications of prematurity. The study is a multicenter randomized controlled trial comparing early postnatal dexamethasone therapy to selective late dexamethasone therapy in infants weighing 501-1000grams. Infants will be randomly allocated to early postnatal steroid or saline placebo. A course of dexamethasone will be given over the first 12 days of life. Data collection will be organized with the Vermont Oxford Neonatal Network. A sample size of 411 patients in each group will be required to demonstrate a 10% reduction in the incidence of chronic lung disease or death at 36 weeks adjusted age. To date, over 40 centers have enrolled 600 infants in the study. The study is currently on hold as of 11/97 due to concerns regarding complications of therapy.